CALPERS: Recommends 10.75% Hike For Kaiser
The California Public Employees' Retirement System (CalPERS), "which covers more than one million state employees and retirees", has tentatively agreed to pay Kaiser Permanente "a 10.75% increase in HMO rates next year," the Wall Street Journal reports. Kaiser had initially "demanded a 12% increase," which resulted in a threat by CalPERS to freeze new Kaiser enrollments and a "nine-week stalemate." William Crist, president of CalPERS' board, said, "I feel good that the staff has brought us a recommended agreement that includes proposals that I think will enable us to move forward with Kaiser without a freeze. ... We will be working with them in the longer term to understand how rates are set, to review what's going on in their business and how that affects our members." Jack Hudes, vice president of sales and marketing for Kaiser's California division said, "We have been mutually trying to find a way to meet both organizations' needs. They need rate relief and greater insight into our financials and ongoing information to prevent future surprises" (Rundle, 6/12).
Cost and Consequence
The San Francisco Chronicle reports that the increase "would cost the average Kaiser-covered family about $20 more a month," and CalPERS "$49.2 million" next year. In addition, CalPERS' acquiescence to an increase "signal[s] a dramatic return of inflationary pressures in the nation's medical system." The Chronicle reports that "[b]ecause of the huge size and visablity of the retirement system, the increase sends a strong warning to other employers and health-plan buyers that significantly higher health care bills are on the way." Maureen O'Haren, executive president at the California Association of Health Plans, a Sacramento trade group, said, "Premiums need to rise." Experts predict that premiums will rise about 5% to 7% on average next year and slightly more on the West Coast (Hall, 6/12). The Journal reports that Kaiser's recommendation "will be reviewed by [CalPERS] health benefits committee and its 13-member board next week" (6/12).